ASIFMA Publishes Report on Outsourcing Regulation

The report includes nine proposed leading principles for regulation of outsourcing to help securities, futures and banking intermediaries navigate different regulatory landscapes in Asia-Pacific.

ASIFMA (the Asia Securities Industry & Financial Markets Association) has released a report proposing leading principles for regulating outsourcing by financial firms.

Outsourcing is rapidly becoming a key part of financial firms’ operating models and brings various benefits such as economies of scale, lower costs, as well as allowing for firms to concentrate on their core business and increase specialisation in their provision of services and resources.

This report, prepared by EY based on feedback from ASIFMA members facing challenges from regulatory fragmentation, proposes nine leading principles for regulation of outsourcing for securities, futures and banking intermediaries in the Asia-Pacific region.

“The rapid evolution and development of outsourcing is considerably changing the business model of financial firms and provides vast potential for increased productivity and efficiencies,” said ASIFMA chief Mark Austen. “Establishing a principle-based regulatory framework can smooth out the difficulties of navigating different regulatory landscapes in Asia-Pacific and would allow firms, their customers and markets to achieve the full benefits from outsourcing.”

The nine proposed leading principles for regulation of outsourcing include: (1) Prohibition of outsourcing, (2) Definition of outsourcing, (3) Materiality, (4) Intra-group outsourcing, (5) Regulatory approvals and notification, (6) Inventory of outsourcing arrangements, (7) Audit requirements, (8) Governance and accountability, and (9) Incident notification and business continuity planning.

ASIFMA recognises the growing need for a regionally aligned approach for the regulation of outsourcing to better serve consumers and markets.

“However, we acknowledge that firms are ultimately accountable to implement the appropriate governance processes to ensure outsourced functions are managed prudently, without compromising the core regulatory objectives of protecting customers and systemic stability,” said Austen.

“The leading principles set out to achieve this through facilitating the dialogue between financial institutions and policymakers.”

The full report is available here.

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